A CBD products company just announced a strategic partnership to bring its brands to Kroger’s national chain of grocery stores. That sent the cannabis company’s stock on a nice little run, but it still doesn’t have what it takes to make it into our portfolios. Make sure you know which stock to avoid…
Last week, The Kroger Co. announced its intention to sell hemp-derived CBD products in 945 stores across 17 states.
Given this latest announcement, it seems that the “Year of CBD” continues to march forward with such incredible speed that it’s probably time to start keeping track of which grocery stores aren’t carrying CBD.
And although Kristal Howard, head of corporate communications and media relations for the retailer, did not share which brands Kroger would carry on its shelves, one cannabis company wasted no time in making its own announcement.
That very same day, CV Sciences Inc. (OTC: CVSI) put out a press release to announce the expansion of its PlusCBD Oil brand in a partnership with Kroger.
Unsurprisingly, the markets responded favorably, sending CV Sciences’ stock price up 10% in one day.
But I’m not recommending CV Sciences at this time – and I won’t until the company proves that it’s capable of implementing sweeping changes.
Earning Our Bottom Rating
I’ve spoken at length about the importance of branding, and the ability to spread brands nationwide in these types of partnerships shows significant promise for cannabis companies – and for anyone investing in them.
But there is more to a company than just a brand.
CV Sciences, like nearly every publicly traded cannabis company, has a presence in the NICILytics database.
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On our proprietary 0-5 rating scale, 1 is the absolute worst score a company can receive – with 0 being reserved for companies that haven’t disclosed enough meaningful information.
The company has a number of red flags that should present a major concern for any investor, and a single-day 10% jump isn’t enough to overcome them.
The markets know that, too, which is exactly why the stock price has since fallen sharply – right around a 10% drop.
Let’s take a look at what exactly is wrong with CV Sciences.
A History of Allegations and Investigations
For one thing, the company has been plagued with controversy.
In June of 2017, CV Sciences founder and CEO Michael Mona, Jr. was charged with fraud for misleading his shareholders. The company’s settlement with the SEC resulted in a fraud judgment against Mona and his ban from holding a director or officer position with any public company.
Consequently, Mona became a regular employee with the company while his son became president. Somehow, though, the elder Mona still received $7.4 million in 2018, including stock grants.
When he finally retired earlier this year, he received a “parting gift” of another $7.8 million.
While CV Sciences does seem finally to be rid of Mona, the former CEO is far from the only concern we have for the company – or even its only controversy.
As we discuss in depth in our full analyst report, CV Sciences’ financials look promising.
But we’re unsure how much we can rely on them in light of a combination of red flags. Among them are securities fraud investigations by numerous law firms and a previous fraud judgment that directly cost the company $150,000 in penalties.
In short, this company has a long way to go before it should be worthy of any investor’s trust.
Fortunately, CV Sciences isn’t the only cannabis company with skin in the game.
The Right Stuff
One company in particular is currently dominating this scene.
In fact, my staff and I have independently confirmed that its brand has found its way into every major retailer to announce its intention to carry CBD products, including Kroger.
I identified this company as an outstanding play some time ago, which is why it earned the coveted 5 rating and became the very first stock I recommended to Cannabis Investor’s Report members when the Institute launched with the American Cannabis Summit last October.
This company is an excellent long-term play as it continues to spread its outstanding, trustworthy brand across the United States, and it has a place in any cannabis investor’s portfolio.
As the markets begin to regain traction – and as the legal landscape continues to change in the industry’s favor – I will continue to offer our members outstanding picks like this one.
Make sure you know how to get them.
Executive Director, National Institute for Cannabis Investors
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14 responses to “Avoid This Stock at All Costs”
June 19 2019